The Press Wednesday, November 27, 1929. The Common wealth Bank.

Press, Volume LXV, Issue 19787, 27 November 1929, Page 10

The Press Wednesday, November 27, 1929. The Common wealth Bank.

The Common wealth Hank. whose powers are to be enlarged by the new Labour Government in Au-tralia. was established in 1912 and has since become an important unit in the banking ,«vstem of the Commonwealth. Backed by the authority of the Government, r was first empowered to carry on the ordinary business of bankinp, including savings bank business and to open branches; but the power to issue notes was not granted till 1920, when the Note I-sue Department was established and the Australian notes previously issued from the Treasury were placed under the authority of the Bank. In I'»_'s a Rural Credits Department was added. The Bank took over the Commonwealth account, the accounts of virion? States, also certain State Savings Banks, and in addition held the accounts of many local governing authorities. Bu* the Bank did not enter into competition with the commercial banks for private accounts; its policy was to concentrate on public accounts not to capture business by offering special inducement.-* to private cuntomrrs. In introducing certain amendments to the Bank Act in 1924, the Commonwealth Treasurer saiii: "It is understood that the policy " of the management up to the present '• has not been to enter into active •• rivalry with the trading banks. . . . " It is fortunate the policy has been

" such iu has been described, becan-e "by reason of that policy the ron- " version of the Commonwealth Bank " into a central Hank has been ren- " dered easier." The Bank was originally managed by a Governor and Deputy-Governor appointed by the Government; but substantial changes in control and management were made by the Act of 1924. Tb* Governor and Deputy-Governor were displaced by a Board of Directors; the Notes Board wa» abolished; the control of the note issue was rested in the directors, and the Bank was given the

right to issue notes against gold and securities in tandon. The capital was increased and the Bank was empowered to fix and publish discount and rediscount rate** and to operate as a clearing house for the private hanks. Under thx Act, half of the net profits nuist be placed to the credit of the Bank Reserve Fund and the remainder be paid into the National Debt Sinking Fund. " The policy of " the Bank." said otie authority, commenting on the 1921 Act, '* was handed " over exclusively to the new Hoard, ™ which also had complete authority "over the note i"»uc, subject to the "arbitrary power of the I'oinmon- '* wealth Government in times of ** stress.** That arbitrary jHiwer, as now appears in the new labour Government's! proposals, is to be exercised, not in emergency, but in accordance with general policy. The risk"* of sneh a departure from normal banking practice are not sneh as prudent Governments cans to face, whatever may be the compertsafing advantages that appear to offer themselves.